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type of company is one that has evolved over time into a
‘branded” image in
the eyes of the public.
This is the opposite of what we have come to
know in today’s world as
Health Maintenance (HMO) and Preferred Provider Organizations (PPO).
A
traditional insurer selling health coverage may specialize in just
health
coverage.
The types of insurance they sell may be
referred to as accident and
health (A&H) or accident and sickness (A&S) companies.
Most states require a separate license to
write life, health and property
casualty.
Stock
and Mutual.
Not only can an insurance company be
categorized by the type of
insurance, they can also be considered in terms of its ownership as
either a
stock or mutual company.
At
the time of organization, a stock company sells stock to raise the
money
necessary to operate a business.
The stockholders are not necessarily insured
by the company nor do
policyholders necessarily own stock in the company.
It is in business solely for the purpose of
selling insurance to
policyholders.
On
the other hand, with a mutual company the policyholders are also owners
of the
company and as such, can vote to elect the company management.
Any monies beyond the operating costs of the
company may be returned to
the policyholders as dividends or reductions in future premiums.
Consumer
Cooperatives. There
are two different types of cooperatives.
They are consumer cooperatives and producer
cooperatives.
Producer cooperatives include companies like
Blue Cross/Blue shield and
some Health Maintenance Organizations which we will discuss further on.
Additionally,
there are two types of consumer cooperatives.
One is the mutual insurance model discussed
previously and the other less
common and unincorporated type is a reciprocal company.
A
reciprocal company is based on the model of give and take.
Members agree to share insurance
responsibilities among all members.
All members insure one another and share in
the losses and no member can
buy insurance without committing to providing insurance in return.
This type of consumer cooperative is managed
by an attorney-in-fact who
handles all matters of business for the cooperative.
Participating
and Non-participating Policies.
These terms indicate that the policyholder of
a traditional type of
insurance, either does or does not participate in, or receive, a share
of any
surplus that results from an insurers business operations.
These terms are also known as par and non-par.
The
surplus from which participating
policyholders might receive a return are excess reserves for claims,
interest on
investments and savings on expenses.
This represents amounts not ear marked for any
particular purpose and are
therefore available to participating policy owners.
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